REPORT ON THE FINANCIAL STATEMENTS OF THE HEALTH SYSTEM STRENGTHENING PROJECT FINANCED BY: INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) CREDIT 63160-LC GRANT TFOB4523 PREPARED BY: THE PROJECT IMPLEMENTATION UNIT OF MINISTRY OF HEALTH, WELLNESS AND ELDERLY AFFAIRS FOR THE PERIOD APRIL 1, 2020 TO MARCH 31, 2021 OCTOBER 2021 I. AUDIT OF THE RESOURCES MANAGED DURING THE PERIOD APRIL 1, 2020 TO MARCH 31, 2021 BY THE MINISTRY OF HEALTH, WELLNESS AND ELDERLY AFFAIRS UNDER THE HEALTH SYSTEM STRENGTHENING PROJECT FINANCED BY WORLD BANK IDA CREDIT NO. 631 60-LC AND GRANT NO. TF0B4523. TABLE OF CONTENTS LJ PAGE TRANSMITTAL LETTER Li SUMMARY Background 1 Scope and Objectives of the Audit 8 Results of the Audit 10 Follow-Up 12 PROJECT FINANCIAL STATEMENTS Auditor's Report 15 Li Project Sources and Uses of Funds 17 Statement of Cumulative Investment 19 Notes to Financial Statements 20 Schedules 26 Tables 28 INTERNAL CONTROL STRUCTURE Auditor's Report 32 DESIGNATED ACCOUNT RECONCILIATION Auditor's Report 34 Designated Account Reconciliation 36 COMPLIANCE Auditor's Report 37 STATEMENT OF REQUEST FOR REPLENISHMENT (IFRs) Auditor's Report 39 E 7 K, GOVERNMENT OFSAINTLUCLA Office of the Director of Audit Conway Business Centre, Level 3, Jn. Baptiste Street Castries, Saint Lucia W.L Tel: 758-468-1508;1510;I501 Fax: 758-468-1534 E-mail: audit0gosl.gov.1c Ref. No. GF 5301-279 November 01, 2021 Mr. Benson Emile Permanent Secretary Ministry of Health, Weliness and Elderly Affairs Sir Stanislaus James Building Waterfront CASTRIES Dear Mr. Emile, Enclosed, please find the Audit Report on the Financial Statements of the Health System Strengthening Project for the period April 1, 2020 to March 31, 2021. The Project is financed by the International Development Association (IDA) Credit 63160-LC and Grant TFOB4523. Yours faithfully, Yvonne James DIRECTOR OF AUDIT Enc. i PROJECT BACKGROUND Financing PROJECT BACKGROUND The Government of Saint Lucia (GOSL) signed two financing agreements and one grant agreement with the World Bank for the Health System Strengthening Project (HSSP). The funds of the World Bank are from the resources of the International Development Association (IDA). The IDA provided the two credits in the amounts of twenty million United States dollars ($20 M) and five million United States dollars ($5 M) towards the financing of HSSP. The IDA, acting as responding agency of the Pandemic Emergency Financing Facility Trust Fund, provided grant funding in the amount not to exceed nine hundred forty-two ILi thousand eight hundred and fifty-seven United States dollars (US$942,857). The HSSP is implemented by the Ministry of Health and Wellness (MOHW) through the Project Implementation Unit (PIU). The IDA credit 63160-LC was approved on September 28, 2018, signed on November 27, 2018 and became effective on January 15, 2019, it was later amended and signed on November 17, 2020. The IDA credit 67290-LC was approved on June 26, 2020, signed on November 17, 2020 and became effective on December 4, 2020. The IDA grant TFOB4523 was approved on November 16, 2020, signed on December 4, 2020 and became effective on December 4, 2020. The expected closing date for withdrawals of monies from both credit no. 63160-LC and 67290-LC is October 31, 2023. The closing date of the withdrawal period of grant funds was January 31, 2021. J The expected closing date of the Project is October 31, 2023. Project Objectives The objective of the project is to improve the accessibility, efficiency and responsiveness of key health services, and provide a response in the event of Eligible Crises or Emergencies. Project Components The Project consists of the following parts: Component 1: Design and implementation of an Essential Benefits Package (US$5.5 million) This Component would include the review and implementation of the benefits package, including administration, purchasing and contracting arrangements, regulations surrounding the scheme, and potential sources of additional revenue for expanding health service coverage. The project will finance the analytics to support the Government in its design of the package and the roll-out of information technology and systems platforms in support of the implementation of the package. Public funds will finance the provision of the package and the project will complement this funding by financing a bonus incentive, through Subcomponent 2.1, to be provided to the health facilities for their achievement of targets related to providing diabetes and hypertension pre-screening and care. Activities described under Component 1 will be undertaken in parallel. Subcomponent 1.1 Review of the Essential Benefits Package (US$1 million) This subcomponent would support the review of the essential benefits package. Proposed activities under this subcomponent, which will be undertaken in parallel, include: 1 i. A review of public sector expenditure in health, including recommendations for efficiency gains and improvements in equity, and recommendations for the development of National Health Accounts; ii. Analytical review of current insurance payment systems and coverage, including reviews of existing structural mechanisms with a potential role in the financing of the benefits package (e.g. NIC), and of the proposed essential benefits package and costing, including actuarial assessments, and periodic update mechanisms (including health technology evaluation [i mechanisms); iii. Evaluation of coverage options for those in the informal (e.g., farmers and taxi drivers) and non-work sectors; iv. Review and simulations of the essential benefits package to identify possible phases for rollout and associated cost and coverage implications; v. The development of Standard Operating Procedures (SOPs)/clinical procedures for case management (e.g., diabetes); vi, An in-depth assessment of the national Health Information System (HIS), including interoperability and integration; and vii. Review and development of legislation governing the proposed benefits package. Subcomponent 1,2: Implementation of the Essential Benefits Package (US$4.5 Million) Findings from the previous subcomponent will support direct actions to roll out the implementation of the benefits package. Proposed activities under this component would include: (i) An assessment of and investments in IT systems and infrastructure for administration of the benefits package, including HIS, SOPs for data entry/management, computer equipment, and a benefits package management system (which will also track referrals); (ii) Development/review of purchaser provider agreements; FJ (iii) Review of and improvements to existing and proposed financial control mechanisms and technical audits (such as financial audits and strategic purchasing arrangements); and (iv) A communications campaign surrounding the benefits package. In addition, this subcomponent would also support necessary capacity building and training efforts for DOHW staff, as well as the rollout of the benefits package among the population, including a helpline for the startup phase. Dependent on the outcome of the evaluation of coverage (Subcomponent 1.1 above), the selection criteria and targeting mechanisms of the potential beneficiaries will be determined to ensure inclusion of the vulnerable population. 2 Component 2: Strengthening Service Delivery in Support of the Essential Benefits Package (US$13 Million) Subcomponent 2.1. Improving Service Delivery through Performance-Based Financing (PBF) (US$4 million) This subcomponent proposes to include a PBF scheme focused on diabetes and hypertension to improve the efficiency of health expenditure by providing bonuses based on performance. PBF for health has been implemented in several countries to achieve health outcomes by linking incentives with results. Commonly referred to as pay for performance or performance-based incentives, programs reward healthcare providers or facilities upon achieving certain performance targets such as immunizing a percentage of the population or increasing the number of preventative screenings in an area. In the case of Saint Lucia, the proposed PBF scheme will focus on strengthening Non-Communicable Diseases (NCD) management at the primary care level. It would aim to strengthen the quality of care for diabetes and hypertension based on standard care protocols, and would provide financial rewards for health facilities according to the achievement of results. The Primary Health Care (PHC) facilities will have flexibility in use of the funds received provided they are considered eligible expenditures; for example, they may choose to distribute them as bonuses for JI the health providers or to use the funds as resources for improvements of the facilities. A draft Operations Manual for the PBF scheme was developed independently of the National Health Scheme, and will be revised to reflect the revised reimbursement structure to ensure it is appropriately linked to the National Health Scheme. U IActivities to be financed under this subcomponent include: i, the revised design of the proposed PBF scheme, including M&E plan and utilization of indicators from the HIS; ii. health facility outreach; and iii. PBF bonus payments based on performance. Project funds for PBF bonus payments will be included in a separate disbursement category, which will need to meet selected Effectiveness Conditions, including the preparation of a PBF manual. The PBF scheme will be rolled out in all Primary Health Care (PHC) facilities in regions 3 and 4 in the first two years of the project, will be scaled up to regions 6 and 7 in years three and four of the project, and will continue in all four regions in the fifth and final year of project implementation. The participating PHC facilities will receive a bonus credit for providing the services to be incentivized and outlined in the basic benefits package. The DOHW and PHC facilities will agree on the targets to be achieved in two areas, number of patients > 18 years screened for diabetes/hypertension based on national protocols; and percent of patients > 18 years with diabetes/hypertension diagnosed and managed according to national protocols. The bonus will consist of an additional budget allocation to the PHC facilities and an incentive budget allocation consisting of an output and result-based disbursement. The additional budget allocation from the DOHW to the PHC facilities will finance one complete annual laboratory analysis to each individual diagnosed as diabetic or hypertensive. The incentive budget allocation includes an output-based allocation provided to each PHC facility for 40% of an amount defined as the capita (US$3.3) multiplied by the registered beneficiaries, paid based on the verified nominalized list of registered beneficiaries; and a result- based disbursement for 60% of an amount defined as the capita (US$3.3) multiplied by the registered beneficiaries adjusted based on results achieved paid against the verified nominalized list of registered beneficiaries and the results achieved in line with the agreed indicators and targets. The target population will consist of individuals that: i) are a 18 years of age; and ii) have one encounter registered in the Health 3 Li Information System (HIS) of a specific PHC facility in the last 18 months or resides in one of the target regions. The total target population will be around 35,000 persons in the four regions. Subcomponent 2.2. Strengthening the Supply of Health Care Services (US$4.5 million). This subcomponent would involve strengthening the integration of primary care systems to enhance the role of primary care facilities and encourage their use as the first point of contact for health services, particularly NCDs. This component would finance goods, minor refurbishments, consultancy services, trainings/workshops, and operational costs in support of key investments/activities. Activities conducted under this subcomponent include: (i) A comprehensive survey of health facilities to ensure institutional readiness to deliver NCD services under the essential benefits package; (ii) Improvement of health facilities including refurbishment, provision of equipment and medical supplies; and (iii) Development of a health facility network to improve tracking of patients across the care pathway. A survey of primary health facilities including equipment inventory, procedures provided, and infrastructure would be conducted to ensure that facilities can deliver the necessary services as described in the benefits package and as required by the NHQP 2016-2026 which aims to provide national commitment, direction and guidance for improving quality in healthcare. Where possible, this survey would utilize available information (such as the Smart Health Facilities Assessment) and available tools such as the World Health Organizations' Service Availability and Readiness Assessment (2005). Subsequently, improvements (such as refurbishment or provision of equipment) to health facilities will be LJ made based on survey outcomes. The type of refurbishments envisioned could include minimal infrastructure adjustments such as establishing partitions in existing structures, improving lighting, and painting. The magnitude of such refurbishments is minor as potential adverse environmental impacts due to these interventions potentially involve dry-wall installation, installation of new lighting fixtures, and properly disposing of unused paint. It is also possible that additions, expansions, or annexes will be rehabilitated or raised, though these are expected to be limited and will not require new land acquisitions, for example, a small area dedicated for storage of medical waste. Where feasible, energy efficient improvements such as improvements in lighting, appliances and equipment will be made. Under the project, the national health care waste management plan will be updated for activities that include the minor refurbishments and the L proper disposal of medical equipment. This may involve improvements to wastewater disposal systems and/or medical waste storage facilities. In addition, the care pathway across the health system will be reviewed to potentiate the use of the less costly primary health care services as the entry point into the system of care. Other possible activities under this component include the roll-out of mobile clinics, Geographic Information Systems, and radio systems for communication with health facilities. Subcomponent 2.3. Public Health Emergency Preparedness and Response (US$4.5 million). As part of efforts to strengthen the health system and address the growing threat posed by climate change, this Project also aims to address weaknesses in public health emergency preparedness and response. Activities conducted under this subcomponent involve strengthening of surveillance and information systems, laboratory capacity, and preparedness for public health emergencies. Activities under this subcomponent include: 4 (i) The development of protocols and the provision of equipment to primary health care centers to enable them to serve as the first point of detection for selected infectious diseases; (ii) Investments in laboratory facilities (such as equipment), data management, transportation and .-1 storage to enable rapid testing for pathogens of interest, including those associated with vector- borne diseases; and r7 (iii) The development of health emergency preparedness and response plans, establishment of emergency operation centers and rapid response teams for public health emergencies, and outbreak communications. Where relevant, investments will also be made in IT systems, e.g. strengthening communication between HIS and DOHW for notification of selected diseases. For example, this subcomponent will support the development of a maternal and child registry L following the impact of Zika on microcephaly. Under the project, the National Health Care Waste Management Plan will be updated to include measures for how to manage equipment distribution and installation in the case of a disease outbreak. Component 3: Institutional Capacity Building, Project Management and Coordination (US$1.5 million) This Component supports project implementation efforts, including project management, fiduciary tasks and monitoring and evaluation (M&E). This component would involve monitoring and evaluation and project management costs associated with supervision of the Project. This Project will be managed by a stand- alone Project Implementation Unit (PIU) housed within the DOHW, whose duties will include oversight of refurbishing projects as well as compliance with safeguards and local permit requirements during refurbishment/rehabilitation, and implementation of the Health Care Waste Management System (HWMS) during operation. The Project also secured a Project Preparation Advance (PPA) to allow project activities to already begin during the preparation process until the project is declared effective. Activities to be financed by the PPA will be implemented with oversight from the existing national-level Project Coordination Unit (N-PCU). Activities to be covered under the PPA will consist solely of consultancies and hiring of staff for the PIU within DOHW. As such, support is envisioned for financial management and procurement functions, in addition to the development of a HWMS in accordance with the Terms of Reference in the ESMF. Component 4. Contingent Emergency Response Component (CERC) (US$5,000,000.00 million). The component will provide surge funding to finance response efforts directed at preventing an outbreak from becoming a deadly and costly pandemic. The component will only be triggered in the case of a public ,I health emergency and when certain actions, as agreed by the Government and Bank teams, are met. These actions include the following: F 1 i. The country declares a national public health emergency; and ii. Presents a sound and actionable country-level response plan. This component provides a platform for country-level discussions on the importance and need for country- level readiness to respond to disease outbreaks. As per the HSSP Financing Agreement, the Recipient shall undertake no activities under the CERC Part (and no activities shall be included in the CERC Part) unless and until the following conditions have been met in respect of said activities: 5 (a) the Recipient has determined that an Eligible Emergency has occurred, has furnished to the Association a request to include said activities in the CERC Part and action plan, in order to respond to said Eligible Emergency, and the Association has agreed with such determination, accepted said request and notified the Recipient thereof; (b) the Recipient has prepared and disclosed all safeguards instruments required for said activities, in accordance with the CERC Operations Manual (OM), the Association has approved all such instruments, and the Recipient has implemented any actions which are [1 required to be taken under said instruments; and safeguards action plan to be prepared; (c) the Recipient has ensured that no activities under the CERC Part fall under the prohibited activities mentioned in CERC Operation Manuel. (iv) In December 2019, an outbreak of coronavirus disease (COVID-19) caused by the 2019 novel coronavirus (SARS-CoV-2) rapidly spread across the world from Wuhan, Hubei Province, China to almost every country in the world. COVID-19 is one of several emerging infectious disease outbreaks that have emerged from animals in contact with humans in recent decades, resulting in major outbreaks with significant public health and economic impacts. March 16, 2020, Saint Lucia had two confirmed cases of COVID-19. On March 23, 2020, a statutory Instrument was issue as a Proclamation for Declaration of State of Emergency. (v) In order to support the response efforts in St Lucia, the request to trigger Component 4 and access the financing allocated to Disbursement Category 3 was communicated to the World Bank's Caribbean Country Director by the Prime Minister/Minister of Finance, Economic Growth, Job Creation, External Affairs and the Public Service for effective of the CERC. LJ (vi) December 4, 2020, the first additional financing of USD5m was approved for the CERC activities and the second additional financing of USD 942,857.00 Pandemic Emergency Financing Facility. Institutional Arrangements Project Oversight The Project Management arrangements are as such that a Project Committee/Steering Committee, chaired by the Permanent Secretary of the Department of Health & Wellness provides oversight and policy guidance to ensure prompt and efficient implementation. The Corporate Planning Unit will serve as a LF secretariat to the Project Steering Committee. Project Implementation 1.1 The financing Agreement requires that the implementation arrangements for the project be established as a two-phase approach with the eventual goal of providing the Saint Lucia MOHW with the overall responsibility for project implementation. The first phase will engage the existing National-PCU to manage the project implementation during an interim period to align with the implementation of the Project IJ Preparation Advance (PPA) activities which will run from July 1, 2018 to February 28, 2019. The second 6 phase will transition the project management function from the N-PCU to the MOHW PIU for the remaining life of the project as stipulated in the PAD. F Ministry of Health and Wellness (MOHW) MOHW is responsible for the implementation of the Project and shall provide the staffing and other resource, satisfactory to the Association, required for the purpose of ensuring the prompt and efficient overall coordination, monitoring, reporting, evaluation and communication of Project activities implementing Agency The Implementing Agency for the Project is the MOHW. The Corporate Planning Unit of the MOIHW will be responsible for project implementation and will keep the Project's executing agencies (government ministries, departments and statutory agencies) involved in the implementation informed on project progress. MOHW Project implementation Unit (MOHW-PIU) The PlU within the Department of Health and Wellness has the delegate responsible for the day-to-day implementation of the Project. The Agreements require that the PIU operates with functions, staff and responsibilities satisfactory to the Bank and be maintained throughout the life of the Project for the purposes of: (1) ensuring timely implementation (ii) financial management and procurement (iii) preparing interim financial reports and arrangements for the annual financial audit of Project financial statements, as well as preparing quarterly and annual Project Reports and their subsequent submission to the Association by the Recipient in a timely manner; (iv) preparing Annual Work Plans and Budgets and annual Procurement Plans; (v) coordinating Project activities; (vi) maintaining consolidated Project accounts; (vii) ensuring adherence to the ESMF of all agencies involved in the implementation of the Project; and (viii) developing and maintaining a system of monitoring the Project Project Effectiveness The IDA Credit #63160 -LC became effective on January 15, 2019 The Project was approved on September 28, 2018. Signed on November 27, 2018. The Closing date is October 31, 2023. Li F1 [7'. OBJECTIVES The purpose of the audit was to express a professional opinion on the financial position of the project at the end of the period audited and to report on the adequacy of the internal controls. With this in mind, the specific objectives of the audit were to: - Issue an opinion as to whether the Project financial statements are prepared, in all material respects, in accordance with the applicable special purpose financial reporting framework. - Issue an opinion as to whether: (a) the expenditures reported are eligible for financing; and (b) credit and grant funds have been adequately reflected in the financial statements used only for Project purposes; and (c) the entity complies with the terms of the credit and grant agreements and applicable laws and regulations (regarding the financial aspects). - Issue an opinion on the Statement of Request for Replenishment (IFRs) for the period audited as to: (a) the eligibility of the expenditures submitted for replenishment, (b) the adequacy of the control procedures for preparing the IFRs, and (c) the correct use of the credit and grant funds. - Issue a report with respect to the adequacy of the internal control structure of the implementing institution in regard to the project. - Issuing an opinion as to whether the Designated Account Statement adequately reflects the flow of funds for the Designated Account during the period audited, and if this activity has been only for purposes of the project. LA SCOPE LI The audit covered the period April 1, 2020 to March 31, 2021, The audit was guided by the International Standards of Supreme Audit Institutions (ISSAls) issued by the International Organization of Supreme Audit Institutions (INTOSAI) and conducted in accordance with the World Bank's requirements. To meet the audit objectives our work included the following procedures and review of the identified documents: - Project Appraisal Document (PAD) - Project Implementation Manual - Financing Agreement #63160-LC - Grant Agreement # TFOB4523 - The Loan Administrations Change Initiative (LAC) - Guidelines Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers - January 2011 Revised July 2014 - World Bank Procurement Regulations for IPF Borrowers - July 2016 - Revised November 2017 - Guidelines Annual Financial Reporting and Auditing for World Bank - Financed Activities - Terms of Reference for Audits of Projects - World Bank Disbursement Guidelines for Projects 2006 - Financial Management Manual for World Bank-Financed Projects LJ- Disbursement Letter and supporting annexes 8 - Estimates of the Government of St. Lucia 2021 and Supplementary Provisions - Financial Accounting Reporting and Auditing Handbook - Laws of Saint Lucia, Chapter 15.01, Finance (Administration) Act - Laws of Saint Lucia, Chapter 15.01, Financial Regulations - Laws of Saint Lucia, Chapter 15.01, Procurement and Stores Regulations - Public Finance Management Act, 2020 - Finance, Treasury and Public Service Circulars - Related Audit Programs - The Disbursement Guidelines for Investment Project Financing, dated February 2017 - Evaluation of the Project Implementation Unit (PlU) internal control structure to assess the extent of compliance with government policies and the requirements of the agreement with the Bank. - Examination of activities undertaken, reports and systems maintained by the PIU during the audited period pertaining to: Cash and Bank Balances Receipt of Funds Uses of Funds (Expenditure) Internal Controls Compliance with Applicable Laws and Regulations 9 L] L J LJ H9 RESULTS OF THE AUDIT A1 Project's Financial Statements The Project Sources and Uses of Funds Statement present fairly the financing and expenditure of the Project. 1-i1 For the audited period, total expenditure reported was US$3,358,079.41 financed by IDA. We noted that IDA's expenditure was eligible for financing as per Credit 63160-LC, Grant TFOB4523 and that project funds were used in accordance with the conditions of the financing agreements. Total IDA revenue reported for the period ending March 31, 2021 was US$6,078,164.54. At the end of the financial year the Designated Account reflected a balance of US$3,071,276.08 representing IDA funds. Internal Control Structure In planning and performing our audit, we considered the PIU's internal control structure in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements. Our evaluation included two levels of control i.e., the general control environment and specific control procedures in various systems. These included: cash and bank balances; receipts of funds; uses of funds (expenditure); compliance with applicable laws and regulations. The internal control structure for the period under audit was assessed and we found the controls to be fair with some improvements required. All financial aspects of the Project undertaken by the implementing entities were controlled and verified by the PIU. However, we noted the following: - Incorrect information reported on the IFR; - Discrepancies noted in the tables to the notes to the financial statement and the contract register; - Expenditure misclassified in the Central Government; Not all expenditure and revenue was recorded in the Central Government's accounts; Variance between planned and actual costs reported on the procurement plan; - No budgetary or supplementary provisions made for grant funds received; and - Goods were purchased before approval by the Project Manager. Compliance with Agreement Terms and Applicable Laws and Regulations In order to obtain reasonable assurance as to whether the financial statements were free from material El misstatement, we performed tests of compliance to ensure agreement with the terms of the financing agreement and applicable laws and regulations. We noted the following: - Contract amount underpaid during the period; - No budgetary or supplementary provisions made for grant funds received; - Deadline for request for quotation extended after quotation was received; - PAYE was not deducted for all employees; - Reports were not submitted as required; F1 10 Li - Procurement plan was not updated and delays in procurement activities; - Procurement method stated on the procurement plan not used for the activity; - Project manager worked without a work permit or exemption from work permit; - Asset and contract registers were not adequately maintained; - Unauthorized signatories; and - Records were not presented for auditing. 1] l . FOLLOW-UP Finding: Difference between the Interim Financial Reports (IFRs) and Statement of Sources and Uses of Funds (SSUF). Action taken and Current Status: The Financial Management Specialist agreed to prepare reconciliation of opening cash balance and the closing cash balance. The expenditure of US$4,028.65 and the over documentation of expenditure of $USD200.00 was adjusted in April 2020. Finding: Misclassification of expenditure. Action Taken and Current Status: No Action was taken. After consulting with the PCU and the World Bank, it was agreed that the payments for the consulting services relating to the design of the result based financing will be recorded under Category 1 in the Statement of Cumulative Investment. Finding: Incorrect amount recorded in the Central Government's accounts. Action Taken and Current Status: Reconciliation of the Revenue Account was prepared and issued to the Accountant General Department in order to make the necessary adjustment. The difference of XCD 7,293.00 between the revenue (XCD 1,292,923.17 and expenditure XCD 1,285,629.17 recorded in the Central Government Accounts has not been corrected. Finding: The Project Implementation Unit (PlU) was not adequately staffed Action taken and Current Status: The M&E Specialist was recruited on July 1, 2020, the PBF Coordinator on August 1, 2020 and the Communication Specialist on August 28, 2020. The PIU is adequately staffed. Finding: GOSL's procurement guidelines were not followed for some procurement activities. LJi Action taken and Current Status: We did not see any cases during the current audit. Finding: World Bank's Procurement Regulations for IPF Borrowers were not followed. Action taken and Current Status: Noted instances where the regulations were not followed 12 Finding: The contract register was not properly maintained. Action taken and Current Status: A column for Expenditure Category was included in the Register. The contract register is still not properly maintained; all required information is not reflected in the contract register. Finding: Unplanned expenditure was paid. Action taken and Current Status: This continues. 7 Finding: Difference between the procurement plan and the annual work plan. LlI Action taken and Current Status: We were informed that annual work plan had been reviewed and updated as per the procurement plan. An annual work plan was not provided to audit for the 2021 audit. Finding: Delays in Project Implementation. Action Taken and Current Status: Management reviewing the activities of the projects and is working on the implementation processes. There were still delays in Project Implementation. Finding: Actual expenditure exceeded budgeted costs. Action taken and Current Status: We were informed that the budgeted costs were reviewed and revised when contracted to reflect the actual costs. Actual expenditure continues to exceed budgeted costs. Finding: Inconsistencies with income taxes associated with individuals employed under the PIU. Action taken and Current Status: Inconsistencies continue in terms of the amount of income tax deducted for individuals paid under the Government Payroll, also for persons paid by the PIlU PAYE was not deducted, withholding tax was deducted from the salary of one officer. The PIU started deducting the PAYE in the subsequent year. Finding: Ll Accommodation and housing allowance was paid for the Project Manager during the same period. Action taken and Current Status: Amount was recovered from the Project Manager. Finding: Contract requirements were not fulfilled. 13 Action taken and Current Status: Project Management has established monitoring and internal controls of contracts with Consultants, in order to ensure that the reporting obligations are met in a timely manner as per contractual agreements. Contractual obligations are still not being fulfilled. The contract requirements were still not fulfilled by Bitran y Asociados and the contract has since been terminated by the Ministry of Health. The Project Manager have not submitted the required quarterly reports due from the previous year. Also, the risk management plan has not been prepared. Finding: The EC Bank account was in overdraft. Action taken and Current Status: The PlU have since then employed mechanisms such as ensuring the bank account has sufficient funds to cover the cheques that have been paid out to suppliers in order to ensure the bank account does not go into overdraft. 14 GOVERNMENT OF SAINT LUCIA Oinfice of the Director o Af isit Conway Business Centre, Level 3, Jn. Baptiste Street Castries, Saint Lucia W.L Tel: 758-468-1508;1510;1501 Fax: 758-468-1534 E-mail: auditagost.aov.lc Ref No. GF 5301-2 79 INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS To: Permanent Secretary, Ministry of Health, Wellness and Elderly Affairs Opinion We have audited the accompanying Statement of Sources and Uses of Funds and a summary of significant accounting policies and other explanatory notes for the Health System Strengthening Project executed by the Ministry of Health, Wellness and Elderly Affairs, financed by the International Development Association (IDA) Credit No. 63160-LC and Grant No,TFOB4523 for the period April 1, 2020 to March 31, 2021. In our opinion, the accompanying special purpose financial statements for the Health System Strengthening Project presents in all material respects the financial position of the project in accordance with the basis of accounting described in Note 2, the financial reporting provisions outlined in the respective legal agreements with the Bank and co-financing organization, In addition, expenditure reported was eligible for financing and grant funds were used only for the project purposes. Basis for Opinion Our audit was guided by the International Standards for Supreme Audit Institutions (ISSAls) issued by the International Organization of Supreme Audit Institution (INTOSAI) and conducted in accordance with the World Bank Guidelines. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statement section of our report. We are independent of the Project in accordance with the Code of Ethics for Auditors in the SAl of Saint Lucia, and we have fulfilled our other responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Matter - Restriction on Use (and Distribution) Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 2 to the special purpose financial statements, which describe the basis of accounting. The special purpose financial statements are prepared to comply with the financial reporting provisions of the World Bank. As a result, the financial statements and related auditor's report may not be suitable for another purpose. Our report is intended for the World Bank and Government of Saint Lucia and should not be distributed to or used by parties other than the World Bank and Government of Saint Lucia. Should any third party take decisions based on the contents of the report, the responsibility for such decisions shall remain with those third parties. Our opinion is not modified in respect of this matter. "Towards Greater Accountability" 15 Responsibilities of Management and those Charged with Governance for the Financial Statements Management is responsible for the preparation of the financial statement in accordance with the basis of accounting described in Note 2 and financial reporting provisions outlined in the respective legal agreements with the World Bank and other co-financing organizations. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the special purpose financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our responsibility is to express an opinion on these special purpose financial statements based on our audit. The ISSAls issued by the INTOSAI and the World Bank's Guidelines, specifically, the Annual Financial Reporting and Auditing for World Bank-Financed Activities require that we comply with ethical requirements as well as plan and perform the audit to obtain reasonable assurance about whether the special purpose financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts represented on, and disclosures in the Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. In conducting those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by program management, as well as evaluating the overall presentation of the financial statements. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 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